California
will suffer more than a $2.1 billion loss in federal funding for grant
programs that aid the poor in 2005-2006, according to a report produced
by economics Professor Michael J. Potepan.

The report, presented to the state Senate Office of Research in Sacramento,
describes the misallocation of federal funds due to alleged inaccurate
poverty estimates. It proposes to remedy the situation by using a more
refined measure.

"People have been working for years to adopt a better poverty
measure," Potepan says. "It is widely acknowledged that the
existing measure has a lot of methodological and conceptual kinds of
problems which may potentially lead to inaccuracy."

The report -- commissioned by the Center for California Studies at
California State University, Sacramento -- includes findings that reveal
California to be among 23 under-funded states using outdated poverty
measurements that the government has used since the early 1960s. With
the current system, California's low-income families are at a higher
disadvantage than any other state in the country, the report asserts.

Potepan says the current system is a "quick and slick sort of
simple device" that does not take into account regional or state
variations in housing and other expenses, creating overestimated poverty
levels in some states and underestimated ones in others. According
to the report, such programs as Medicaid, Head Start, the National
School Lunch Program and Temporary Assistance for Needy Families will
be either over- or under-funded for years to come.

"Every effort should be made to encourage the Office of Management
and Budget and the Bureau of the Census to officially adopt an improved
alternative poverty measure to replace the outmoded one," Potepan
writes in the report.

His proposed solution is to implement a method developed by the National
Academy of Science and Census Bureau, which he believes to be much
more accurate.

Potepan says that this method has not yet been put to use because
of its high cost and potential political ramifications.

Potepan presented his report to the Senate Office
of Research in April. Read the
report.